Wall Street had a pretty realistic expectation for BlackBerry's 2014 quarter 4 report: they expected a loss of 5 cents per share. Based on their past quarters, this expectation was completely reasonable and founded. CEO John Chen had other ideas, however, having slashed costs this past year, he hoped for a profit. Lucky for Chen, his goals were to become reality.
In fact, the company posted profit of 4 cents per share for the 4th quarter. This beat not only Wall Street predictions, but also all sense of reality. In an age where Android and iOS own the mobile landscape, and Windows is a distant third, it is hard to imagine that BlackBerry could have found enough coins in the sofa cushions to have recovered so strongly. The problem for BlackBerry is they might not have.
The company's software revenue was up 24 percent year-over-year, which is definitely a signal of a business category growing. However, the software division accounted for only $67 million of the $660 million total revenue for the company. That accounts for only 10 percent of the overall revenue, and barely enough to swing the whole variance from deficit to profit, assuming all of the revenue was new.
So, how did Chen manage to push the company, which by all accounts should be searching for a buyer, into profitability? A lot of it has to do with massive cuts throughout the corporation. The problem for Chen is that budget cuts are not a long-term solution to a sinking ship. If you need a litmus test, let's look at RadioShack. In 2006, RadioShack hired Julian Day as CEO, who immediately made sweeping budget cuts throughout the company. The stock price jumped above $35 for the first time in several years and Wall Street hailed him a genius.
Flash forward to today, and RadioShack is still in bankruptcy, as their signs are coming off stores worldwide. Why, when it appeared that the company was saved by Day, did the company still go down? Because, while playing a numbers game, Day forgot to actually make people care about the company again. BlackBerry is in the same boat right now - a successful quarter does not indicate a win for BlackBerry.
If Chen would like to keep his job as CEO of BlackBerry, he is going to have to do more than increase software revenues to $67 million - he is going to need to put a spark back into the brand.
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